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/* -*- mode: c++; tab-width: 4; indent-tabs-mode: nil; c-basic-offset: 4 -*- */
/*
Copyright (C) 2007 Cristina Duminuco
Copyright (C) 2007 Giorgio Facchinetti
This file is part of QuantLib, a free-software/open-source library
for financial quantitative analysts and developers - http://quantlib.org/
QuantLib is free software: you can redistribute it and/or modify it
under the terms of the QuantLib license. You should have received a
copy of the license along with this program; if not, please email
<quantlib-dev@lists.sf.net>. The license is also available online at
<https://www.quantlib.org/license.shtml>.
This program is distributed in the hope that it will be useful, but WITHOUT
ANY WARRANTY; without even the implied warranty of MERCHANTABILITY or FITNESS
FOR A PARTICULAR PURPOSE. See the license for more details.
*/
#include <ql/cashflows/capflooredcoupon.hpp>
#include <ql/cashflows/digitalcoupon.hpp>
#include <ql/indexes/indexmanager.hpp>
#include <ql/indexes/interestrateindex.hpp>
namespace QuantLib {
DigitalCoupon::DigitalCoupon(const ext::shared_ptr<FloatingRateCoupon>& underlying,
Rate callStrike,
Position::Type callPosition,
bool isCallATMIncluded,
Rate callDigitalPayoff,
Rate putStrike,
Position::Type putPosition,
bool isPutATMIncluded,
Rate putDigitalPayoff,
ext::shared_ptr<DigitalReplication> replication,
const bool nakedOption)
: FloatingRateCoupon(underlying->date(),
underlying->nominal(),
underlying->accrualStartDate(),
underlying->accrualEndDate(),
underlying->fixingDays(),
underlying->index(),
underlying->gearing(),
underlying->spread(),
underlying->referencePeriodStart(),
underlying->referencePeriodEnd(),
underlying->dayCounter(),
underlying->isInArrears()),
underlying_(underlying), isCallATMIncluded_(isCallATMIncluded),
isPutATMIncluded_(isPutATMIncluded), nakedOption_(nakedOption) {
if (replication == nullptr)
replication = ext::make_shared<DigitalReplication>();
QL_REQUIRE(replication->gap()>0.0, "Non positive epsilon not allowed");
callLeftEps_ = callRightEps_ = putLeftEps_ = putRightEps_ = replication->gap() / 2;
replicationType_ = replication->replicationType();
if (putStrike == Null<Rate>()) {
QL_REQUIRE(putDigitalPayoff == Null<Rate>(),
"Put Cash rate non allowed if put strike is null");
}
if (callStrike == Null<Rate>()) {
QL_REQUIRE(callDigitalPayoff == Null<Rate>(),
"Call Cash rate non allowed if call strike is null");
}
if (callStrike != Null<Rate>()) {
hasCallStrike_ = true;
callStrike_ = callStrike;
switch (callPosition) {
case Position::Long :
callCsi_ = 1.0;
break;
case Position::Short :
callCsi_ = -1.0;
break;
default:
QL_FAIL("unsupported position type");
}
if (callDigitalPayoff != Null<Rate>()){
callDigitalPayoff_ = callDigitalPayoff;
isCallCashOrNothing_ = true;
}
}
if (putStrike != Null<Rate>()){
hasPutStrike_ = true;
putStrike_ = putStrike;
switch (putPosition) {
case Position::Long :
putCsi_ = 1.0;
break;
case Position::Short :
putCsi_ = -1.0;
break;
default:
QL_FAIL("unsupported position type");
}
if (putDigitalPayoff != Null<Rate>()){
putDigitalPayoff_ = putDigitalPayoff;
isPutCashOrNothing_ = true;
}
}
switch (replicationType_) {
case Replication::Central :
// do nothing
break;
case Replication::Sub :
if (hasCallStrike_) {
switch (callPosition) {
case Position::Long :
callLeftEps_ = 0.;
callRightEps_ = replication->gap();
break;
case Position::Short :
callLeftEps_ = replication->gap();
callRightEps_ = 0.;
break;
default:
QL_FAIL("unsupported position type");
}
}
if (hasPutStrike_) {
switch (putPosition) {
case Position::Long :
putLeftEps_ = replication->gap();
putRightEps_ = 0.;
break;
case Position::Short :
putLeftEps_ = 0.;
putRightEps_ = replication->gap();
break;
default:
QL_FAIL("unsupported position type");
}
}
break;
case Replication::Super :
if (hasCallStrike_) {
switch (callPosition) {
case Position::Long :
callLeftEps_ = replication->gap();
callRightEps_ = 0.;
break;
case Position::Short :
callLeftEps_ = 0.;
callRightEps_ = replication->gap();
break;
default:
QL_FAIL("unsupported position type");
}
}
if (hasPutStrike_) {
switch (putPosition) {
case Position::Long :
putLeftEps_ = 0.;
putRightEps_ = replication->gap();
break;
case Position::Short :
putLeftEps_ = replication->gap();
putRightEps_ = 0.;
break;
default:
QL_FAIL("unsupported position type");
}
}
break;
default:
QL_FAIL("unsupported replication type");
}
registerWith(underlying);
}
Rate DigitalCoupon::callOptionRate() const {
Rate callOptionRate = Rate(0.);
if(hasCallStrike_) {
// Step function
callOptionRate = isCallCashOrNothing_ ? callDigitalPayoff_ : callStrike_;
CappedFlooredCoupon next(underlying_, callStrike_ + callRightEps_);
CappedFlooredCoupon previous(underlying_, callStrike_ - callLeftEps_);
callOptionRate *= (next.rate() - previous.rate())
/ (callLeftEps_ + callRightEps_);
if (!isCallCashOrNothing_) {
// Call
CappedFlooredCoupon atStrike(underlying_, callStrike_);
Rate call = underlying_->rate() - atStrike.rate();
// Sum up
callOptionRate += call;
}
}
return callOptionRate;
}
Rate DigitalCoupon::putOptionRate() const {
Rate putOptionRate = Rate(0.);
if(hasPutStrike_) {
// Step function
putOptionRate = isPutCashOrNothing_ ? putDigitalPayoff_ : putStrike_;
CappedFlooredCoupon next(underlying_, Null<Rate>(), putStrike_ + putRightEps_);
CappedFlooredCoupon previous(underlying_, Null<Rate>(), putStrike_ - putLeftEps_);
putOptionRate *= (next.rate() - previous.rate())
/ (putLeftEps_ + putRightEps_);
if (!isPutCashOrNothing_) {
// Put
CappedFlooredCoupon atStrike(underlying_, Null<Rate>(), putStrike_);
Rate put = - underlying_->rate() + atStrike.rate();
// Sum up
putOptionRate -= put;
}
}
return putOptionRate;
}
void DigitalCoupon::deepUpdate() {
update();
underlying_->deepUpdate();
}
void DigitalCoupon::performCalculations() const {
QL_REQUIRE(underlying_->pricer(), "pricer not set");
Date fixingDate = underlying_->fixingDate();
Date today = Settings::instance().evaluationDate();
bool enforceTodaysHistoricFixings =
Settings::instance().enforcesTodaysHistoricFixings();
Rate underlyingRate = nakedOption_ ? 0.0 : underlying_->rate();
if (fixingDate < today ||
((fixingDate == today) && enforceTodaysHistoricFixings)) {
// must have been fixed
rate_ = underlyingRate + callCsi_ * callPayoff() + putCsi_ * putPayoff();
} else if (fixingDate == today) {
// might have been fixed
if (underlying_->index()->hasHistoricalFixing(fixingDate)) {
rate_ = underlyingRate + callCsi_ * callPayoff() + putCsi_ * putPayoff();
} else {
rate_ = underlyingRate + callCsi_ * callOptionRate() + putCsi_ * putOptionRate();
}
} else {
rate_ = underlyingRate + callCsi_ * callOptionRate() + putCsi_ * putOptionRate();
}
}
Rate DigitalCoupon::rate() const {
calculate();
return rate_;
}
Rate DigitalCoupon::convexityAdjustment() const {
return underlying_->convexityAdjustment();
}
Rate DigitalCoupon::callStrike() const {
if (hasCall())
return callStrike_;
else
return Null<Rate>();
}
Rate DigitalCoupon::putStrike() const {
if (hasPut())
return putStrike_;
else
return Null<Rate>();
}
Rate DigitalCoupon::callDigitalPayoff() const {
if (isCallCashOrNothing_)
return callDigitalPayoff_;
else
return Null<Rate>();
}
Rate DigitalCoupon::putDigitalPayoff() const {
if (isPutCashOrNothing_)
return putDigitalPayoff_;
else
return Null<Rate>();
}
void DigitalCoupon::accept(AcyclicVisitor& v) {
typedef FloatingRateCoupon super;
auto* v1 = dynamic_cast<Visitor<DigitalCoupon>*>(&v);
if (v1 != nullptr)
v1->visit(*this);
else
super::accept(v);
}
Rate DigitalCoupon::callPayoff() const {
// to use only if index has fixed
Rate payoff(0.);
if(hasCallStrike_) {
Rate underlyingRate = underlying_->rate();
if ( (underlyingRate - callStrike_) > 1.e-16 ) {
payoff = isCallCashOrNothing_ ? callDigitalPayoff_ : underlyingRate;
} else {
if (isCallATMIncluded_) {
if ( std::abs(callStrike_ - underlyingRate) <= 1.e-16 )
payoff = isCallCashOrNothing_ ? callDigitalPayoff_ : underlyingRate;
}
}
}
return payoff;
}
Rate DigitalCoupon::putPayoff() const {
// to use only if index has fixed
Rate payoff(0.);
if(hasPutStrike_) {
Rate underlyingRate = underlying_->rate();
if ( (putStrike_ - underlyingRate) > 1.e-16 ) {
payoff = isPutCashOrNothing_ ? putDigitalPayoff_ : underlyingRate;
} else {
// putStrike_ <= underlyingRate
if (isPutATMIncluded_) {
if ( std::abs(putStrike_ - underlyingRate) <= 1.e-16 )
payoff = isPutCashOrNothing_ ? putDigitalPayoff_ : underlyingRate;
}
}
}
return payoff;
}
}
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